How the industry can prepare for the next wave of PRA rules – Stonebridge

by: Paul Nye, director, business partnerships, Stonebridge Group

It seems that as an industry, mortgage market practitioners are constantly having to get used to what many describe as ‘a new normal’.

With so much regulatory change, market forces and competitive pressures at play, it can appear that any ‘new normal’ doesn’t tend to stick around for long. Indeed, one might argue that the market is in a constant state of flux and, with so many outside influences to take note of, the chances of any sort of ongoing stability tend to be short-lived.

Looking at the prospects for the buy-to-let sector in 2017 and beyond, I can’t help but think this has been one area where ‘normality’ has shifted constantly over the last two years in particular. Buy to let at the start of 2017 is a very different beast to what it was in the middle of 2015, for example, and you might argue that even with all the changes that have been placed upon it, that with many more to come we’re unlikely to get to a stable place over the next 12 months.

With all this change, it makes the sector a difficult one to get a grasp on, especially for clients who have been trying to work out how the raft of taxation changes impact their investment(s), but also specifically for advisers. With the PRA underwriting rules kicking off this year, having a handle firstly, on how lenders will react to the rule changes, and secondly, how this will impact on lending levels, criteria and pricing, is not an easy ask.

And yet underlying all of this, you can’t help feel that the durability of the sector remains undiminished. Even with all that change, it appears that after an up-and-down 2016 lending appetite remains, demand is still in tact, and that advisers will continue to be charged with finding the most appropriate finance options for buy-to-let clients. This might not translate into greater levels of lending in 2017 compared to 2016, but it does mean that advisers have to be prepared and knowledgeable about what is available in the marketplace and how this might have changed in recent weeks.

In this context, the ‘professionalisation’ of the buy-to-let market continues apace, which means we are seeing far greater use of limited company vehicles to purchase, plus greater diversification with landlords perhaps looking further afield from their ‘normal’ investment locale, HMOs, for instance, or multi-block units. It’s here especially, that having knowledge of the specialist lenders and their often unique offerings is likely to make all the difference in terms of turning potential clients into completions.

And given what is coming in September, with the PRA’s introduction of new underwriting rules for professional landlords, this does seem like the perfect opportunity for advisers to be making contact with clients to ensure they are utilising the most appropriate vehicles to finance or refinance.

Most anticipate a huge increase in the amount of paperwork required by lenders when these new rules kick in, and it therefore may make sense to get ahead of the curve on this one. Whatever its future, it seems apparent that buy-to-let normality is set to change again by the end of the year. The good news appears to be continued activity from all stakeholders and therefore this remains a sector which is strong and certainly one worth engaging in.

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